Patent Law Rulings and Regulations

The Supreme Court goes after bad patents and trolls

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The Supreme Court has been actively pursuing invalid patents as well as taking aim at patent trolls. Here are the rulings and regs from 2014.

Trolls beware! Supreme Court loosens standards for fee-shifting in patent cases. In a ruling that may limit some patent trolling activity, the Supreme Court lowered standards regarding the award of attorney fees. Previously, courts would only award attorney fees if the court found either (1) litigation-related misconduct that was at a sanctionable magnitude or (2) the litigation was both “brought in subjective bad faith” and “objectively baseless." The Supreme Court found these standards to be inflexible and redefined the term “exceptional,” stating that it is "simply [a dispute] that stands out from others with regards to the strength of a company's case or the 'unreasonable manner' in which they made it.” In summary, judges now have more leeway to decide when a patent litigant is entitled to attorney fees. Octane Fitness v. Icon Health and Fitness and Highmark v. Allcare Health 566 U.S. __ (2014).

Another strike against trolls? The “reasonable certainty” standard: Nautilus v. Biosig Instruments. In Nautilus, Inc. v. Biosig Instruments, Inc., the Supreme Court instructed a lower court to reconsider a ruling regarding the validity of a patent for monitoring heart rate. The court held that a patent would be invalid for indefiniteness if its claims failed to define the scope of the invention with “reasonable certainty.” This is a lower standard than the previously accepted “insolubly ambiguous” standard. The Supreme Court's decision may make patent claims easier to invalidate, a boon to those fighting off patent trolls but a bane for those trying to pursue infringers. Nautilus, Inc. v. Biosig Instruments, Inc., 566 U.S. __ (2014).

Inducement of infringement requires direct infringement. In Limelight Networks, Inc. v. Akamai Technologies, Inc., 566 U.S. __ (2014), the Supreme Court unanimously ruled that there is no liability for induced patent infringement – encouraging someone else to infringe -- unless there has been direct (or actual) patent infringement. Akamai exclusively licensed a patent for delivering data. Limelight was accused of inducing infringement. However Limelight never directly infringed the patent because it did not carry out all of the steps claimed in the method. Instead, Limelight’s customers carried out one of the steps. Because there was no direct infringement, the Supreme Court concluded there could be no inducement to infringe.

Software patents take a hit: Alice Corp. v. CLS. In Alice Corp. v. CLS Bank International, the Supreme Court declared a software patent invalid because the method employed – a computer assisted process for exchanging financial obligations – was an abstract idea, ineligible for patent protection. The court held that a company can no longer patent an “instruction to apply [an] abstract idea ... using some un-specified, generic computer.” In other words, as one observer put it, “it's not enough just to add "on a computer" to something abstract or obvious to make it patentable.”

Unfortunately, the Supreme Court avoided specifics as to how to measure or determine when a software invention is based on an abstract idea. That caused some confusion at the USPTO who first ignored the decision, then reversed position and began issuing refusals based upon the revised standards.

The case is a continuation of the Supreme Court’s recent revisions of patent validity standards. In Association for Molecular Pathology v. Myriad Genetics, Inc. 566 U. S. __ (2012), the Supreme Court held invalid a gene patent claimed by a Utah company that was the first to extract and isolate two genes apart from the human body. In Mayo v. Prometheus, 566 U.S. ___ (2012), the Supreme Court ruled that a three-step process -- (a) administering a drug to a subject, (b) determining metabolite levels, and (c) warning the subject regarding adjustments of dosage – was not patentable subject matter (patent claims cannot cover natural phenomena). The ruling was considered a blow to medical process patents and many patent practitioners criticized the underlying reasoning of the court, warning that it would have a negative effect on biotech innovation. And in its 2010 decision in Bilski v. Kappos ,561 U.S. 593 (2010), the Supreme Court found that a method of optimizing a fixed bill system for energy markets was an unpatentable abstract idea. Alice Corporation Pty. Ltd. v. CLS Bank International et al., 566 U.S. ___ (2014).

USPTO modifies Micro Entity status gross income limit. One of the qualifications for reduced patent filing fees (Micro-Entity status) is that the applicant had to have had a gross income in the previous year of less than three times the median household income reported by the Bureau of the Census. For 2014, that gross income total was determined to be $155,817.

USPTO releases the ninth edition of the Manual of Patent Examining Procedure (MPEP). The USPTO has published and made electronically available a new edition of the Manual of Patent Examining Procedure (MPEP). View edition 9 of the MPEP at http://www.uspto.gov/mpep or a searchable version at http://mpep.uspto.gov.